Co-operative societies have been warned against placing members’ savings in unregulated institutions, with the government saying the practice violates the law and exposes depositors to serious financial risk.
The Commissioner for Co-operative Development, David Obonyo, said some societies are ignoring statutory safeguards by investing funds in entities that fall outside the country’s regulatory framework.
In a directive dated December 23, 2025, and circulated to the Sacco Societies Regulatory Authority (SASRA), Obonyo said the State Department for Co-operatives had observed a worrying rise in non-compliant investment practices within the sector.
He said co-operative leaders have a duty to protect members’ funds and act within approved investment guidelines, warning that failure to comply amounts to a breach of both legal and fiduciary responsibility.
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The advisory follows growing concern over financial exposure suffered by several SACCOs after depositing funds with the Kenya Union of Savings and Credit Cooperatives (KUSCCO), which is not subject to regulatory oversight. Governance failures at the umbrella body have left some societies facing potential losses running into billions of shillings.
The law restricts how co-operatives may invest surplus funds. Section 45 of the Co-operative Societies Act requires societies to place deposits only with licensed institutions, including commercial banks, statutory bodies and approved trust funds.
In addition, Rule 50 of the Co-operative Societies Rules prohibits investments in non-core business activities unless such ventures receive clearance from the Commissioner and approval by members through a special resolution at a general meeting.
The government has warned that co-operatives found to be in breach may be ordered to withdraw from unlawful investments, with officials facing sanctions or other regulatory action for continued non-compliance.
By Mercy Kokwon
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